Coming Week: Don't Count on the Fed

Stocks will limp into the next week at levels not seen since the Bear Stearns debacle, with no hope of a boost from the Federal Reserve.

Oil and other commodity prices rallied again last week while credit conditions worsened on Wall Street and the dollar weakened further.

The Fed, which will release its June decision on interest rates Wednesday, will almost certainly hold steady, leaving investors to parse through its policy statements for any sign of what will come next.

"Our view is that the pressures on the Fed are going to get worse over the next few months," says Lehman Brothers economist Ethan Harris. "They're going to face headline inflation of about 5% with the release of the August CPI, but simultaneously, they'll see a continued string of weak labor market reports with a rising unemployment rate, so those two pieces of data are going to offset each other and leave the Fed with its hands tied."

Crude oil futures bubbled up again Friday to close near $135 a barrel while stocks tanked. The Dow Jones Industrial Average lost 3.8% over the week and fell back below the 12,000 mark to finish up at its lowest close since March 10. The S&P 500 shed 3% to hits its lowest close since March 28, and the Nasdaq Composite dropped 2%.

The latest spike in crude came after The New York Times reported Friday that Israel has performed a military exercise in potential preparation for a bombing of Iran's nuclear facilities. The market's reaction was a stark demonstration of the sensitivities that exist on Wall Street to geopolitical shocks as it grapples with a relentless financial crisis.